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Contracts

Exam 12
30 minutes

Fact Pattern

Sculptor recently announced that he would be showing his new work, Consideration, at an upcoming art exhibition, where he would invite serious offers to purchase it. Gallery Owner attended this exhibition. Being very impressed with Consideration, Gallery Owner believed the work would be a notable acquisition for her gallery. She thus wanted to talk to Sculptor about buying it. 

At the exhibition, Sculptor was available to talk with attendees about the work, answer questions, and open general negotiations, but he was clear that any firm contract negotiations would have to take place later. As Gallery Owner spoke with Sculptor that evening about the work, she noticed that at least half a dozen other attendees seemed seriously interested in purchasing the piece.

When Gallery Owner called Sculptor the next morning, Sculptor indicated that he wanted $1 million for Consideration. Gallery Owner was willing to pay that amount, but she would require two weeks to secure the necessary financing. Additionally, Gallery Owner believed that such a costly acquisition would be appropriate only if she could curate an entire show around the piece. This, in turn, would require buying or renting other accompanying sculptures and related artwork. Gallery Owner was worried, however, that in the time she would need to plan such an exhibit and acquire the accompanying pieces, another museum owner or private collector would purchase Consideration out from under her. 

As a solution, Gallery Owner proposed an option contract. She would immediately pay Sculptor $25,000. In exchange, Sculptor would offer to sell her Consideration for $1 million, keeping this offer open to her for one month. Sculptor agreed to Gallery Owner’s proposal. Gallery Owner, however, never sent Sculptor the check for $25,000. 

In the intervening month, Gallery Owner planned a larger exhibit to showcase Consideration, and she secured financing for the purchase. Sculptor, meanwhile, received several inquiries from other potential buyers; with each inquiry, he explained his outstanding offer to Gallery Owner. But one very interested art collector claimed to be absolutely in love with Consideration. The collector also said that if Sculptor could somehow get out of his offer to Gallery Owner, the art collector would pay double what Gallery Owner offered for the piece. 

Impressed by the art collector’s offer, Sculptor looked back at his records and realized thatGallery Owner had not sent him the $25,000 check, as she promised. Sculptor wrote Gallery Owner a letter stating that he revoked his offer. Three hours after Sculptor dropped his letter in the mail, and exactly three weeks after Sculptor initially offered to sell Consideration to Gallery Owner for $1 million, Gallery Owner sent an email accepting Sculptor’s offer to sell her Consideration for $1 million. 

Sculptor, eager to sell Consideration for $2 million instead of $1 million, called Gallery Owner and told her that his offer was no longer open. Gallery Owner promptly sued Sculptor for breach of contract.


Questions

  1. Could Gallery Owner enforce her option contract with Sculptor? Explain.
  2. If Sculptor fails to deliver Consideration to Gallery Owner, is he in breach of a contract with Gallery Owner? Explain.

Question 1

Could Gallery Owner enforce her option contract with Sculptor? Explain.

Question 2

If Sculptor fails to deliver Consideration to Gallery Owner, is he in breach of a contract with Gallery Owner? Explain.

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